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Japan’s Nikkei flat before U.S. CPI test; banks rally on BOJ speculation

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TOKYO — Japan’s Nikkei share average ended little changed on Thursday, on caution ahead of key U.S. inflation data, with banking stocks rallying amid speculation about a Bank of Japan (BOJ) stimulus tweak heading into next week’s policy meeting.

The Nikkei ended the day up 0.01% at 26,449.82, after touching 26,547.61 for the first time since Dec. 27. The markets initially tracked overnight Wall Street gains amid bets that a mitigation in the pace of U.S. consumer price gains will allow the Federal Reserve to dial back the pace of its rate hikes.

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“The topside is heavy, with investors fine-tuning positions ahead of the CPI report,” said Maki Sawada, a strategist at Nomura.

“At the same time, the bottom also seems quite firm,” she added. “The market’s expectation that the U.S. economy can navigate a soft rather than hard landing is supporting stocks, including in Japan.”

Banking stocks rallied following a Yomiuri newspaper report that central bank officials would review the side effects of massive stimulus at their policy meeting next week, fanning speculation for a near-term policy shift. The Tokyo Stock Exchange’s banking subindex rallied 4.26%.

A stronger yen, which gained about 0.6% to 131.73 per dollar on Thursday in Asia, also made stocks heavy, market participants said.

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“One of the things that have kept earnings from collapsing in Japan has been the weaker yen,” said Amir Anvarzadeh, a market strategist at Asymmetric Advisors.

“Now that the yen is going back the other way, the rug is going to be pulled under the feet of manufacturers with big overseas earnings, particularly the multinationals.”

Nintendo fell 1.8%, while carmaker Subaru slumped 1.86%. Uniqlo store operator Fast Retailing declined 1.98%.

Travel-related shares fell amid entry restrictions on Chinese tourists. The air and rail transport subindexes sank 0.43% and 0.98%, respectively. (Reporting by Kevin Buckland, additional reporting by Ankur Banerjee; Editing by Rashmi Aich and Uttaresh.V)

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